A survey of the extent of global operations of local manufacturing firms in Nairobi

Abstract

The study was undertaken on manufacturing firms that have Kenya as their country of original registration, hitherto referred to as local firms. The study sought to establish the extent of globalization of local firms and the factors facilitating and those constraining globalization of local firms. For determining the extent of globalization of local firms, the Uppsala model was adopted that contains the following four stages: ~ No regular export activities. ~ Export via overseas agents or independent representatives. ~ Establishment of an overseas sales subsidiary. ~ Overseas manufacturing production. Fifty firms were picked to form the sample of the study using systematic random sampling from the firms listed in the Kenya Association of Manufacturers (KAM) as at August 2002. The study found that most local firms that export products are in the second stage of globalization that is they are exporting through overseas agents or independent representatives. This implies that there is room for firms to move to the other stages of the model and expand their horizons as well as their market. The study also found that the main reasons t hat local firms are globalizing are to exploit foreign market opportunities and the presence of more competitors in Kenya leading to saturation of the market in Kenya. They are also keen to utilize synergies possible by exploiting the economies of scale arising from higher production capacities as well as exploiting excess capacity. Other important factors are to extend the product life cycle and take advantage of tax benefits. The study found the following to be the facilitators of globalization for Kenyan firms were the political factors in Kenya, accessibility of information on foreign markets and investment opportunities, foreign currency deregulation as well as the current regional trading blocks. Others are economic considerations and the availability and accessibility of capital. On the other hand several constraints were identified as hindering the practice of globalization. These include the political factors affecting neighbouring countries, government regulations and the trade barriers facing Kenyan firms wanting to export goods to foreign markets. The study used primary data collected through a questionnaire administered to 50 respondents located in Nairobi. However only 35 of these returned filled questionnaires.